I have a client that experienced embezzlement and has set up a payment plan for the individual to pay restitution. I have an asset account to hold the principal amount as a "loan" to the business, but what is the other side to the journal entry? The loss was experienced in a prior year and the books are closed for that year & taxes filed. TIA for any advice.
You mentioned the loss was experienced in a prior year. If it was recorded as a loss, then the offsetting entry should be a deferred income account. AFAIK, if your client deducted the loss in a previous year, then it is generally taxable when received.
You mentioned the loss was experienced in a prior year. If it was recorded as a loss, then the offsetting entry should be a deferred income account. AFAIK, if your client deducted the loss in a previous year, then it is generally taxable when received.
Thanks @Rainflurry . I just started on their books this year and not sure how they booked the loss. I'll get with the client to get more info. I appreciate your response. It makes sense to set up a deferred income account.
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